filings.toolsItem 1. Financial Statements.
73K characters. Original on sec.gov · Markdown
Item 1. Financial Statements.
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
(UNAUDITED) CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | ||||||||
| 2023 | 2022 | ||||||||
| (In Millions, Except Par Value Data) | |||||||||
| ASSETS | |||||||||
| Current Assets: | |||||||||
| Cash and cash equivalents | $ | 421.5 | $ | 358.0 | |||||
| Restricted cash | — | 0.8 | |||||||
| Restricted investments (to satisfy discharged debt and related interest) | 702.3 | 704.6 | |||||||
| Accounts receivable, net | 979.2 | 785.9 | |||||||
| Inventories, net | 954.7 | 873.7 | |||||||
| Current assets held for sale | 44.8 | 73.2 | |||||||
| Other current assets | 89.8 | 80.7 | |||||||
| Total Current Assets | 3,192.3 | 2,876.9 | |||||||
| Property, plant and equipment | 10,859.3 | 10,661.0 | |||||||
| Allowances for depreciation, depletion and amortization | (4,546.5 | ) | (4,344.3 | ) | |||||
| Net property, plant and equipment | 6,312.8 | 6,316.7 | |||||||
| Goodwill | 3,649.5 | 3,649.5 | |||||||
| Other intangibles, net | 833.8 | 847.8 | |||||||
| Operating lease right-of-use assets, net | 384.4 | 383.5 | |||||||
| Noncurrent assets held for sale | 325.6 | 372.5 | |||||||
| Other noncurrent assets | 547.8 | 546.7 | |||||||
| Total Assets | $ | 15,246.2 | $ | 14,993.6 | |||||
| LIABILITIES AND EQUITY | |||||||||
| Current Liabilities: | |||||||||
| Accounts payable | $ | 346.9 | $ | 385.0 | |||||
| Accrued salaries, benefits and payroll taxes | 63.6 | 71.6 | |||||||
| Accrued other taxes | 90.7 | 55.4 | |||||||
| Accrued interest | 42.5 | 42.8 | |||||||
| Current maturities of discharged long-term debt | 700.0 | 699.1 | |||||||
| Operating lease liabilities | 53.2 | 52.1 | |||||||
| Current liabilities held for sale | 0.9 | 4.5 | |||||||
| Other current liabilities | 144.6 | 135.1 | |||||||
| Total Current Liabilities | 1,442.4 | 1,445.6 | |||||||
| Long-term debt | 4,343.1 | 4,340.9 | |||||||
| Deferred income taxes, net | 915.8 | 914.3 | |||||||
| Noncurrent operating lease liabilities | 337.0 | 335.9 | |||||||
| Noncurrent liabilities held for sale | 17.5 | 21.8 | |||||||
| Other noncurrent liabilities | 767.0 | 762.3 | |||||||
| Total Liabilities | 7,822.8 | 7,820.8 | |||||||
| Equity: | |||||||||
| Common stock, par value $0.01 per share (61.8 shares and 62.1 shares outstanding at June 30, 2023 and December 31, 2022, respectively) | 0.6 | 0.6 | |||||||
| Preferred stock, par value $0.01 per share | — | — | |||||||
| Additional paid-in capital | 3,500.8 | 3,489.0 | |||||||
| Accumulated other comprehensive loss | (35.7 | ) | (38.5 | ) | |||||
| Retained earnings | 3,955.4 | 3,719.4 | |||||||
| Total Shareholders' Equity | 7,421.1 | 7,170.5 | |||||||
| Noncontrolling interests | 2.3 | 2.3 | |||||||
| Total Equity | 7,423.4 | 7,172.8 | |||||||
| Total Liabilities and Equity | $ | 15,246.2 | $ | 14,993.6 |
See accompanying notes to the consolidated financial statements.
Page 3 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
(UNAUDITED) CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (In Millions, Except Per Share Data) | ||||||||||||||||
| Total Revenues | $ | 1,820.8 | $ | 1,641.7 | $ | 3,174.9 | $ | 2,872.5 | ||||||||
| Total Cost of Revenues | 1,260.4 | 1,216.5 | 2,311.7 | 2,291.2 | ||||||||||||
| Gross Profit | 560.4 | 425.2 | 863.2 | 581.3 | ||||||||||||
| Selling, general and administrative expenses | 111.6 | 104.1 | 216.0 | 201.2 | ||||||||||||
| Acquisition and integration expenses | 0.4 | 2.9 | 1.2 | 4.3 | ||||||||||||
| Other operating income, net | (14.9 | ) | (160.4 | ) | (13.3 | ) | (162.6 | ) | ||||||||
| Earnings from Operations | 463.3 | 478.6 | 659.3 | 538.4 | ||||||||||||
| Interest expense | 42.2 | 43.1 | 84.3 | 83.6 | ||||||||||||
| Other nonoperating income, net | (18.7 | ) | (22.0 | ) | (34.9 | ) | (32.9 | ) | ||||||||
| Earnings from continuing operations before income tax expense | 439.8 | 457.5 | 609.9 | 487.7 | ||||||||||||
| Income tax expense | 91.9 | 104.4 | 127.5 | 110.2 | ||||||||||||
| Earnings from continuing operations | 347.9 | 353.1 | 482.4 | 377.5 | ||||||||||||
| Earnings (Loss) from discontinued operations, net of income tax expense (benefit) | 0.7 | 13.3 | (12.2 | ) | 10.2 | |||||||||||
| Consolidated net earnings | 348.6 | 366.4 | 470.2 | 387.7 | ||||||||||||
| Less: Net earnings (loss) attributable to noncontrolling interests | 0.3 | (0.1 | ) | 0.5 | (0.2 | ) | ||||||||||
| Net Earnings Attributable to Martin Marietta | $ | 348.3 | $ | 366.5 | $ | 469.7 | $ | 387.9 | ||||||||
| Consolidated Comprehensive Earnings (Loss) (See Note 1): | ||||||||||||||||
| Earnings attributable to Martin Marietta | $ | 350.0 | $ | 367.7 | $ | 472.5 | $ | 357.4 | ||||||||
| Earnings (Loss) attributable to noncontrolling interests | 0.2 | (0.1 | ) | 0.5 | (0.2 | ) | ||||||||||
| $ | 350.2 | $ | 367.6 | $ | 473.0 | $ | 357.2 | |||||||||
| Net Earnings (Loss) Attributable to Martin Marietta | ||||||||||||||||
| Per Common Share: | ||||||||||||||||
| Basic from continuing operations attributable to common shareholders | $ | 5.61 | $ | 5.66 | $ | 7.78 | $ | 6.06 | ||||||||
| Basic from discontinued operations attributable to common shareholders | 0.01 | 0.21 | (0.20 | ) | 0.16 | |||||||||||
| $ | 5.62 | $ | 5.87 | $ | 7.58 | $ | 6.22 | |||||||||
| Diluted from continuing operations attributable to common shareholders | $ | 5.60 | $ | 5.65 | $ | 7.76 | $ | 6.04 | ||||||||
| Diluted from discontinued operations attributable to common shareholders | 0.01 | 0.21 | (0.20 | ) | 0.16 | |||||||||||
| $ | 5.61 | $ | 5.86 | $ | 7.56 | $ | 6.20 | |||||||||
| Weighted-Average Common Shares Outstanding: | ||||||||||||||||
| Basic | 61.9 | 62.4 | 62.0 | 62.4 | ||||||||||||
| Diluted | 62.1 | 62.5 | 62.2 | 62.6 |
See accompanying notes to the consolidated financial statements.
Page 4 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
(UNAUDITED) CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| (Dollars in Millions) | ||||||||
| Cash Flows from Operating Activities: | ||||||||
| Consolidated net earnings | $ | 470.2 | $ | 387.7 | ||||
| Adjustments to reconcile consolidated net earnings to net cash provided by operating activities: | ||||||||
| Depreciation, depletion and amortization | 253.1 | 256.6 | ||||||
| Stock-based compensation expense | 27.7 | 24.5 | ||||||
| Gain on sales of assets, divestitures and extinguishment of debt | (16.3 | ) | (173.9 | ) | ||||
| Deferred income taxes, net | 0.7 | (32.7 | ) | |||||
| Other items, net | (4.5 | ) | (3.4 | ) | ||||
| Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: | ||||||||
| Accounts receivable, net | (196.2 | ) | (252.6 | ) | ||||
| Inventories, net | (92.2 | ) | (79.5 | ) | ||||
| Accounts payable | 44.5 | 68.5 | ||||||
| Other assets and liabilities, net | 31.5 | 91.0 | ||||||
| Net Cash Provided by Operating Activities | 518.5 | 286.2 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Additions to property, plant and equipment | (293.4 | ) | (220.7 | ) | ||||
| Acquisitions, net of cash acquired | — | 11.0 | ||||||
| Proceeds from sales of assets and divestitures | 95.5 | 644.4 | ||||||
| Investments in life insurance contracts, net | 4.8 | 1.8 | ||||||
| Other investing activities, net | (4.2 | ) | (3.0 | ) | ||||
| Net Cash (Used for) Provided by Investing Activities | (197.3 | ) | 433.5 | |||||
| Cash Flows from Financing Activities: | ||||||||
| Repayments of debt | — | (47.7 | ) | |||||
| Payments on finance lease obligations | (8.4 | ) | (7.3 | ) | ||||
| Dividends paid | (82.5 | ) | (77.0 | ) | ||||
| Repurchases of common stock | (150.0 | ) | (50.0 | ) | ||||
| Distributions to owners of noncontrolling interest | (0.5 | ) | — | |||||
| Proceeds from exercise of stock options | 0.8 | 0.6 | ||||||
| Shares withheld for employees’ income tax obligations | (17.9 | ) | (25.1 | ) | ||||
| Net Cash Used for Financing Activities | (258.5 | ) | (206.5 | ) | ||||
| Net Increase in Cash, Cash Equivalents and Restricted Cash | 62.7 | 513.2 | ||||||
| Cash, Cash Equivalents and Restricted Cash, beginning of period | 358.8 | 258.9 | ||||||
| Cash, Cash Equivalents and Restricted Cash, end of period | $ | 421.5 | $ | 772.1 |
See accompanying notes to the consolidated financial statements.
Page 5 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
(UNAUDITED) CONSOLIDATED STATEMENTS OF TOTAL EQUITY
| (In Millions, Except Per Share Data) | Shares of Common Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Shareholders' Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||
| Balance at March 31, 2023 | 62.0 | $ | 0.6 | $ | 3,487.2 | $ | (37.4 | ) | $ | 3,724.6 | $ | 7,175.0 | $ | 2.5 | $ | 7,177.5 | ||||||||||||||||
| Consolidated net earnings | — | — | — | — | 348.3 | 348.3 | 0.3 | 348.6 | ||||||||||||||||||||||||
| Other comprehensive earnings, net of tax | — | — | — | 1.7 | — | 1.7 | — | 1.7 | ||||||||||||||||||||||||
| Dividends declared ($0.66 per common share) | — | — | — | — | (41.3 | ) | (41.3 | ) | — | (41.3 | ) | |||||||||||||||||||||
| Issuances of common stock for stock award plans | — | — | 0.7 | — | — | 0.7 | — | 0.7 | ||||||||||||||||||||||||
| Shares withheld for employees' income tax obligations | — | — | (1.1 | ) | — | — | (1.1 | ) | — | (1.1 | ) | |||||||||||||||||||||
| Repurchases of common stock | (0.2 | ) | — | — | — | (76.2 | ) | (76.2 | ) | — | (76.2 | ) | ||||||||||||||||||||
| Stock-based compensation expense | — | — | 14.0 | — | — | 14.0 | — | 14.0 | ||||||||||||||||||||||||
| Distributions to owners of noncontrolling interests | — | — | — | — | — | — | (0.5 | ) | (0.5 | ) | ||||||||||||||||||||||
| Balance at June 30, 2023 | 61.8 | $ | 0.6 | $ | 3,500.8 | $ | (35.7 | ) | $ | 3,955.4 | $ | 7,421.1 | $ | 2.3 | $ | 7,423.4 | ||||||||||||||||
| Balance at December 31, 2022 | 62.1 | $ | 0.6 | $ | 3,489.0 | $ | (38.5 | ) | $ | 3,719.4 | $ | 7,170.5 | $ | 2.3 | $ | 7,172.8 | ||||||||||||||||
| Consolidated net earnings | — | — | — | — | 469.7 | 469.7 | 0.5 | 470.2 | ||||||||||||||||||||||||
| Other comprehensive earnings, net of tax | — | — | — | 2.8 | — | 2.8 | — | 2.8 | ||||||||||||||||||||||||
| Dividends declared ($1.32 per common share) | — | — | — | — | (82.5 | ) | (82.5 | ) | — | (82.5 | ) | |||||||||||||||||||||
| Issuances of common stock for stock award plans | 0.1 | — | 2.0 | — | — | 2.0 | — | 2.0 | ||||||||||||||||||||||||
| Shares withheld for employees' income tax obligations | — | — | (17.9 | ) | — | — | (17.9 | ) | — | (17.9 | ) | |||||||||||||||||||||
| Repurchases of common stock | (0.4 | ) | — | — | — | (151.2 | ) | (151.2 | ) | — | (151.2 | ) | ||||||||||||||||||||
| Stock-based compensation expense | — | — | 27.7 | — | — | 27.7 | — | 27.7 | ||||||||||||||||||||||||
| Distributions to owners of noncontrolling interest | — | — | — | — | — | — | (0.5 | ) | (0.5 | ) | ||||||||||||||||||||||
| Balance at June 30, 2023 | 61.8 | $ | 0.6 | $ | 3,500.8 | $ | (35.7 | ) | $ | 3,955.4 | $ | 7,421.1 | $ | 2.3 | $ | 7,423.4 |
See accompanying notes to the consolidated financial statements.
Page 6 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
(UNAUDITED) CONSOLIDATED STATEMENTS OF TOTAL EQUITY (Continued)
| (In Millions, Except Per Share Data) | Shares of Common Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Shareholders' Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||
| Balance at March 31, 2022 | 62.4 | $ | 0.6 | $ | 3,462.6 | $ | (129.3 | ) | $ | 3,094.9 | $ | 6,428.8 | $ | 2.2 | $ | 6,431.0 | ||||||||||||||||
| Consolidated net earnings (loss) | — | — | — | — | 366.5 | 366.5 | (0.1 | ) | 366.4 | |||||||||||||||||||||||
| Other comprehensive earnings, net of tax | — | — | — | 1.2 | — | 1.2 | — | 1.2 | ||||||||||||||||||||||||
| Dividends declared ($0.61 per common share) | — | — | — | — | (38.3 | ) | (38.3 | ) | — | (38.3 | ) | |||||||||||||||||||||
| Issuances of common stock for stock award plans | — | — | 0.1 | — | — | 0.1 | — | 0.1 | ||||||||||||||||||||||||
| Shares withheld for employees' income tax obligations | — | — | (0.7 | ) | — | — | (0.7 | ) | — | (0.7 | ) | |||||||||||||||||||||
| Stock-based compensation expense | — | — | 12.4 | — | — | 12.4 | — | 12.4 | ||||||||||||||||||||||||
| Balance at June 30, 2022 | 62.4 | $ | 0.6 | $ | 3,474.4 | $ | (128.1 | ) | $ | 3,423.1 | $ | 6,770.0 | $ | 2.1 | $ | 6,772.1 | ||||||||||||||||
| Balance at December 31, 2021 | 62.4 | $ | 0.6 | $ | 3,470.4 | $ | (97.6 | ) | $ | 3,161.9 | $ | 6,535.3 | $ | 2.3 | $ | 6,537.6 | ||||||||||||||||
| Consolidated net earnings (loss) | — | — | — | — | 387.9 | 387.9 | (0.2 | ) | 387.7 | |||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | (30.5 | ) | — | (30.5 | ) | — | (30.5 | ) | |||||||||||||||||||||
| Dividends declared ($1.22 per common share) | — | — | — | — | (76.7 | ) | (76.7 | ) | — | (76.7 | ) | |||||||||||||||||||||
| Issuances of common stock for stock award plans | — | — | 4.6 | — | — | 4.6 | — | 4.6 | ||||||||||||||||||||||||
| Shares withheld for employees' income tax obligations | — | — | (25.1 | ) | — | — | (25.1 | ) | — | (25.1 | ) | |||||||||||||||||||||
| Repurchases of common stock | — | — | — | — | (50.0 | ) | (50.0 | ) | — | (50.0 | ) | |||||||||||||||||||||
| Stock-based compensation expense | — | — | 24.5 | — | — | 24.5 | — | 24.5 | ||||||||||||||||||||||||
| Balance at June 30, 2022 | 62.4 | $ | 0.6 | $ | 3,474.4 | $ | (128.1 | ) | $ | 3,423.1 | $ | 6,770.0 | $ | 2.1 | $ | 6,772.1 |
See accompanying notes to the consolidated financial statements.
Page 7 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Significant Accounting Policies
Organization
Martin Marietta Materials, Inc. (the Company or Martin Marietta) is a natural resource-based building materials company. As of June 30, 2023, the Company supplies aggregates (crushed stone, sand and gravel) through its network of approximately 350 quarries, mines and distribution yards in 28 states, Canada and The Bahamas. Martin Marietta also provides cement and downstream products and services, namely, ready mixed concrete, asphalt and paving, in vertically-integrated structured markets where the Company also has a leading aggregates position. In addition, the Company has one cement plant that is classified as assets held for sale and reported as discontinued operations as of and for the six months ended June 30, 2023. The Company's Stockton, California cement import terminal, through the date of disposal (see Note 2), was reported as discontinued operations for the three and six months ended June 30, 2023 and 2022, and classified as assets held for sale as of December 31, 2022. The Company’s heavy-side building materials are used in infrastructure, nonresidential and residential construction projects. Aggregates are also used in agricultural, utility and environmental applications and as railroad ballast. The aggregates, cement, ready mixed concrete, asphalt and paving product lines are reported collectively as the “Building Materials” business.
The Company’s Building Materials business includes two reportable segments: the East Group and the West Group.
| BUILDING MATERIALS BUSINESS (continuing operations only) | ||||
| Reportable Segments | East Group | West Group | ||
| Operating Locations | Alabama, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, Nova Scotia and The Bahamas | Arizona, Arkansas, California, Colorado, Louisiana, Oklahoma, Texas, Utah, Washington and Wyoming | ||
| Product Lines | Aggregates and Asphalt | Aggregates, Cement, Ready Mixed Concrete, Asphalt and Paving |
The Company’s Magnesia Specialties business, which represents a separate reportable segment, has manufacturing facilities in Manistee, Michigan, and Woodville, Ohio. The Magnesia Specialties business produces magnesia-based chemicals products used in industrial, agricultural and environmental applications, and dolomitic lime sold primarily to customers for steel production and soil stabilization.
Basis of Presentation and Use of Estimates
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and in Article 10 of Regulation S-X. The Company has continued to follow the accounting policies set forth in the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In the opinion of management, the interim consolidated financial information provided herein reflects all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the results of operations, financial position
Page 8 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
and cash flows for the interim periods. The consolidated results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results expected for other interim periods or the full year. The consolidated balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The preparation of the Company’s consolidated financial statements requires management to make certain estimates and assumptions about future events. As future events and their effects cannot be fully determined with precision, actual results could differ significantly from estimates. Changes in estimates are reflected in the consolidated financial statements in the period in which the change in estimate occurs.
Revenue Recognition
Total revenues include sales of products and services to customers, net of discounts or allowances, if any, and freight and delivery costs billed to customers. Product revenues are recognized when control of the promised good is transferred to unaffiliated customers, typically when finished products are shipped. Intersegment and interproduct revenues are eliminated in consolidation. Service revenues are derived from the paving business and are recognized using the percentage-of-completion method under the cost-to-cost approach. When the Company arranges third-party freight to deliver products to customers, the Company has elected the delivery to be a fulfillment activity rather than a separate performance obligation. Further, the Company acts as a principal in the delivery arrangements and, as required by Accounting Standards Codification (ASC) 606, the related revenues and costs are presented gross in the consolidated statements of earnings and are recognized consistently with the timing of the product revenues.
Restricted Cash
At December 31, 2022, the Company had restricted cash of $0.8 million, which was invested in an account designated for the purchase of like-kind exchange replacement assets under Section 1031 of the Internal Revenue Code and related IRS procedures (Section 1031). The Company was restricted from utilizing the cash for purposes other than the purchase of qualified assets for 180 days from receipt of the proceeds from the sale of the exchanged property. Any unused cash at the end of the 180 days was transferred to unrestricted accounts of the Company and used for general corporate purposes. There was no restricted cash at June 30, 2023.
The statements of cash flows reflect cash flow changes and balances for cash, cash equivalents and restricted cash on an aggregated basis. The following table reconciles cash, cash equivalents and restricted cash as reported on the consolidated balance sheets to the aggregated amounts presented on the consolidated statements of cash flows:
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Dollars in Millions) | ||||||||
| Cash and cash equivalents | $ | 421.5 | $ | 358.0 | ||||
| Restricted cash | — | 0.8 | ||||||
| Total cash, cash equivalents and restricted cash presented in the consolidated statements of cash flows | $ | 421.5 | $ | 358.8 |
Page 9 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Restricted Investments
At June 30, 2023 and December 31, 2022, the Company had $702.3 million and $704.6 million, respectively, of restricted investments, representing assets irrevocably transferred to an escrow trust account to satisfy and discharge the Company’s $700.0 million of 0.650% Senior Notes due 2023 (the 2023 Notes) (see Note 4). The assets in the escrow trust account could not be used for any purpose other than to satisfy the remaining interest payments and to repay the principal amount of the 2023 Notes on the maturity date of July 15, 2023. The assets transferred to the escrow trust account were invested in a U.S. Treasury securities fund (see Note 5) and investment returns on those trust assets were for the account of the Company (after satisfaction of all amounts payable in connection with the 2023 Notes). The Company consolidated the trust account on its balance sheets at June 30, 2023 and December 31, 2022.
Consolidated Comprehensive Earnings (Loss) and Accumulated Other Comprehensive Loss
Consolidated comprehensive earnings (loss) consist of consolidated net earnings, adjustments for the funded status of pension and postretirement benefit plans and foreign currency translation adjustments, and are presented in the Company’s consolidated statements of earnings and comprehensive earnings.
Consolidated comprehensive earnings (loss) attributable to Martin Marietta is as follows:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Net earnings attributable to Martin Marietta | $ | 348.3 | $ | 366.5 | $ | 469.7 | $ | 387.9 | ||||||||
| Other comprehensive earnings (loss), net of tax | 1.7 | 1.2 | 2.8 | (30.5 | ) | |||||||||||
| Consolidated comprehensive earnings attributable to Martin Marietta | $ | 350.0 | $ | 367.7 | $ | 472.5 | $ | 357.4 |
Accumulated other comprehensive loss consists of unrecognized gains and losses related to the funded status of the pension and postretirement benefit plans and foreign currency translation and is presented on the Company’s consolidated balance sheets.
Page 10 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The components of the changes in accumulated other comprehensive loss, net of tax, are as follows:
| (Dollars in Millions) | ||||||||||||
| Pension and Postretirement Benefit Plans | Foreign Currency | Accumulated Other Comprehensive Loss | ||||||||||
| Three Months Ended June 30, 2023 | ||||||||||||
| Balance at beginning of period | $ | (35.5 | ) | $ | (1.9 | ) | $ | (37.4 | ) | |||
| Other comprehensive earnings before reclassifications, net of tax | — | 0.5 | 0.5 | |||||||||
| Amounts reclassified from accumulated other comprehensive loss, net of tax | 1.2 | — | 1.2 | |||||||||
| Other comprehensive earnings, net of tax | 1.2 | 0.5 | 1.7 | |||||||||
| Balance at end of period | $ | (34.3 | ) | $ | (1.4 | ) | $ | (35.7 | ) | |||
| Three Months Ended June 30, 2022 | ||||||||||||
| Balance at beginning of period | $ | (129.7 | ) | $ | 0.4 | $ | (129.3 | ) | ||||
| Other comprehensive earnings (loss) before reclassifications, net of tax | 0.4 | (0.9 | ) | (0.5 | ) | |||||||
| Amounts reclassified from accumulated other comprehensive loss, net of tax | 1.7 | — | 1.7 | |||||||||
| Other comprehensive earnings (loss), net of tax | 2.1 | (0.9 | ) | 1.2 | ||||||||
| Balance at end of period | $ | (127.6 | ) | $ | (0.5 | ) | $ | (128.1 | ) |
| (Dollars in Millions) | ||||||||||||
| Pension and Postretirement Benefit Plans | Foreign Currency | Accumulated Other Comprehensive Loss | ||||||||||
| Six Months Ended June 30, 2023 | ||||||||||||
| Balance at beginning of period | $ | (36.5 | ) | $ | (2.0 | ) | $ | (38.5 | ) | |||
| Other comprehensive earnings before reclassifications, net of tax | 0.1 | 0.6 | 0.7 | |||||||||
| Amounts reclassified from accumulated other comprehensive loss, net of tax | 2.1 | — | 2.1 | |||||||||
| Other comprehensive earnings, net of tax | 2.2 | 0.6 | 2.8 | |||||||||
| Balance at end of period | $ | (34.3 | ) | $ | (1.4 | ) | $ | (35.7 | ) | |||
| Six Months Ended June 30, 2022 | ||||||||||||
| Balance at beginning of period | $ | (97.6 | ) | $ | — | $ | (97.6 | ) | ||||
| Other comprehensive loss before reclassifications, net of tax | (33.0 | ) | (0.5 | ) | (33.5 | ) | ||||||
| Amounts reclassified from accumulated other comprehensive loss, net of tax | 3.0 | — | 3.0 | |||||||||
| Other comprehensive loss, net of tax | (30.0 | ) | (0.5 | ) | (30.5 | ) | ||||||
| Balance at end of period | $ | (127.6 | ) | $ | (0.5 | ) | $ | (128.1 | ) |
Page 11 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The $33.0 million, net of tax, other comprehensive loss before reclassifications in the Pension and Postretirement Benefit Plans for the six months ended June 30, 2022 was driven by the remeasurement of the funded status of the Company’s qualified pension plan, required as a result of a plan amendment that provided an enhanced benefit for eligible hourly employees.
Changes in net noncurrent deferred tax assets related to accumulated other comprehensive loss are as follows:
| Pension and Postretirement Benefit Plans | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Balance at beginning of period | $ | 49.8 | $ | 80.2 | $ | 50.1 | $ | 69.7 | ||||||||
| Tax effect of other comprehensive (earnings) loss | (0.4 | ) | (0.7 | ) | (0.7 | ) | 9.8 | |||||||||
| Balance at end of period | $ | 49.4 | $ | 79.5 | $ | 49.4 | $ | 79.5 |
Reclassifications out of accumulated other comprehensive loss are as follows:
| Three Months Ended | Six Months Ended | Affected line items in the consolidated | ||||||||||||||||
| June 30, | June 30, | statements of earnings | ||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | and comprehensive earnings | ||||||||||||||
| (Dollars in Millions) | ||||||||||||||||||
| Pension and postretirement benefit plans | ||||||||||||||||||
| Amortization of: | ||||||||||||||||||
| Prior service cost | $ | 1.6 | $ | 1.2 | $ | 2.8 | $ | 2.1 | ||||||||||
| Actuarial loss | — | 1.1 | — | 1.9 | ||||||||||||||
| 1.6 | 2.3 | 2.8 | 4.0 | Other nonoperating income, net | ||||||||||||||
| Tax effect | (0.4 | ) | (0.6 | ) | (0.7 | ) | (1.0 | ) | Income tax expense | |||||||||
| Total | $ | 1.2 | $ | 1.7 | $ | 2.1 | $ | 3.0 |
Earnings per Common Share
The numerator for basic and diluted earnings per common share is net earnings attributable to Martin Marietta, reduced by dividends and undistributed earnings attributable to certain of the Company’s stock-based compensation arrangements. If there is a net loss, no amount of the undistributed loss is attributed to unvested participating securities. The denominator for basic earnings per common share is the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed assuming that the weighted-average number of common shares is increased by the conversion, using the treasury stock method, of awards to be issued to employees and nonemployee members of the Company’s Board of Directors under certain stock-based compensation arrangements if the conversion is dilutive. For the three and six months ended June 30, 2023 and 2022, the diluted per-share computations reflect the number of common shares outstanding including the number of additional shares that would have been outstanding if the potentially dilutive common shares had been issued.
Page 12 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following table reconciles the denominator for basic and diluted earnings from continuing operations per common share:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (In Millions) | ||||||||||||||||
| Basic weighted-average common shares outstanding | 61.9 | 62.4 | 62.0 | 62.4 | ||||||||||||
| Effect of dilutive employee and director awards | 0.2 | 0.1 | 0.2 | 0.2 | ||||||||||||
| Diluted weighted-average common shares outstanding | 62.1 | 62.5 | 62.2 | 62.6 |
Reclassifications
As of June 30, 2023, the Company combined products and services revenues and freight revenues into total revenues, and combined cost of revenues - products and services and cost of revenues - freight into total cost of revenues on the Company's consolidated statements of earnings and comprehensive earnings. Prior-year information has been reclassified to conform to the current-year presentation. The reclassifications had no impact on the Company’s previously reported results of operations, financial position or cash flows.
2.
Divestitures, Discontinued Operations and Assets and Liabilities Held for Sale
Divestitures
Since October 1, 2021, the California cement businesses have been classified as assets held for sale on the Company’s consolidated balance sheets; the associated financial results have been reported as discontinued operations on the consolidated statements of earnings. On May 3, 2023, the Company divested its Stockton cement import terminal in California.
On June 30, 2022, the Company completed the sale of the Redding, California cement plant, related cement distribution terminals and 14 California ready mix operations for $235 million in cash. These businesses were previously classified as assets held for sale and their associated financial results were reported as discontinued operations.
On April 1, 2022, the Company divested its Colorado and Central Texas ready-mixed concrete operations to Smyrna Ready Mix Concrete LLC. This transaction optimized the Company’s aggregates-led portfolio and improved its ability to generate more attractive margins over the long term by reducing both business cyclicality and exposure to raw material cost inflation. The transaction resulted in a pretax gain of $151.7 million, which was included in Other operating income, net, and was inclusive of expenses incurred due to the divestiture. The divested operations and the gain on divestiture were all reported in the West Group.
Page 13 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Discontinued Operations
On April 26, 2023, the Company terminated its agreement with CalPortland Company regarding the sale of the Company’s Tehachapi, California cement plant to CalPortland in light of the parties being unable to timely obtain the necessary approval by the U.S. Federal Trade Commission. The Company is exploring the potential sale of the Tehachapi plant to other buyers.
For the three and six months ended June 30, 2023, discontinued operations included the Company's Tehachapi, California cement plant and California ready mixed concrete operations as well as the Stockton, California cement import terminal through the May 3, 2023 divestiture. Discontinued operations for the three and six months ended June 30, 2022 also included the Company's Redding, California cement plant, related cement distribution terminals and 14 California ready mix operations that were sold in June 2022 (hereinafter, the Redding transaction).
Financial results for the Company's discontinued operations are as follows:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Total revenues | $ | 34.5 | $ | 111.7 | $ | 59.2 | $ | 206.4 | ||||||||
| Pretax (loss) earnings from operations | $ | (1.4 | ) | $ | 20.5 | $ | (18.5 | ) | $ | 16.4 | ||||||
| Pretax gain (loss) on divestiture and sales of assets | 2.3 | (1.0 | ) | 2.3 | (1.0 | ) | ||||||||||
| Pretax earnings (loss) | 0.9 | 19.5 | (16.2 | ) | 15.4 | |||||||||||
| Income tax expense (benefit) | 0.2 | 6.2 | (4.0 | ) | 5.2 | |||||||||||
| Earnings (loss) from discontinued operations, net of income tax expense (benefit) | $ | 0.7 | $ | 13.3 | $ | (12.2 | ) | $ | 10.2 |
Total cash provided by operating and investing activities for discontinued operations was $42.5 million for the six months ended June 30, 2023, which included $57.5 million of proceeds from a divestiture and sales of assets and $3.8 million of cash used for capital expenditures. Total cash provided by operating and investing activities for the six months ended June 30, 2022 was $224.2 million, which included $235.0 million of proceeds from divestitures and $13.2 million of cash used for capital expenditures.
Assets and Liabilities Held for Sale
Assets and liabilities held for sale at June 30, 2023 primarily included a cement plant in Tehachapi, California and certain investment properties. At December 31, 2022, assets and liabilities held for sale also included the Stockton, California cement import terminal that was sold in May 2023 and the California ready mixed concrete plants not sold as part of the Redding transaction.
Page 14 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Assets and liabilities held for sale are as follows:
| June 30, 2023 | December 31, 2022 | |||||||||||||||||||||||
| Continuing Operations | Discontinued Operations | Total | Continuing Operations | Discontinued Operations | Total | |||||||||||||||||||
| (Dollars in Millions) | ||||||||||||||||||||||||
| Inventories, net | $ | — | $ | 26.0 | $ | 26.0 | $ | — | $ | 31.3 | $ | 31.3 | ||||||||||||
| Investment land | 18.6 | — | 18.6 | 40.6 | — | 40.6 | ||||||||||||||||||
| Other assets | — | 0.2 | 0.2 | — | 1.3 | 1.3 | ||||||||||||||||||
| Total current assets held for sale | $ | 18.6 | $ | 26.2 | $ | 44.8 | $ | 40.6 | $ | 32.6 | $ | 73.2 | ||||||||||||
| Property, plant and equipment | $ | — | $ | 86.8 | $ | 86.8 | $ | — | $ | 124.5 | $ | 124.5 | ||||||||||||
| Intangible assets, excluding goodwill | — | 208.5 | 208.5 | — | 208.5 | 208.5 | ||||||||||||||||||
| Operating lease right-of-use assets | — | 2.9 | 2.9 | — | 12.1 | 12.1 | ||||||||||||||||||
| Goodwill | — | 31.9 | 31.9 | — | 31.9 | 31.9 | ||||||||||||||||||
| Valuation allowance for loss on sale | — | (4.5 | ) | (4.5 | ) | — | (4.5 | ) | (4.5 | ) | ||||||||||||||
| Total noncurrent assets held for sale | $ | — | $ | 325.6 | $ | 325.6 | $ | — | $ | 372.5 | $ | 372.5 | ||||||||||||
| Lease obligations | $ | — | $ | (0.9 | ) | $ | (0.9 | ) | $ | — | $ | (4.5 | ) | $ | (4.5 | ) | ||||||||
| Total current liabilities held for sale | $ | — | $ | (0.9 | ) | $ | (0.9 | ) | $ | — | $ | (4.5 | ) | $ | (4.5 | ) | ||||||||
| Lease obligations | $ | — | $ | — | $ | — | $ | — | $ | (4.1 | ) | $ | (4.1 | ) | ||||||||||
| Asset retirement obligations | — | (17.5 | ) | (17.5 | ) | — | (17.7 | ) | (17.7 | ) | ||||||||||||||
| Total noncurrent liabilities held for sale | $ | — | $ | (17.5 | ) | $ | (17.5 | ) | $ | — | $ | (21.8 | ) | $ | (21.8 | ) |
3.
Inventories, Net
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Dollars in Millions) | ||||||||
| Finished products | $ | 1,060.9 | $ | 932.4 | ||||
| Products in process | 21.0 | 24.8 | ||||||
| Raw materials | 87.3 | 71.7 | ||||||
| Supplies and expendable parts | 169.3 | 153.1 | ||||||
| Total inventories | 1,338.5 | 1,182.0 | ||||||
| Less: allowances | (383.8 | ) | (308.3 | ) | ||||
| Inventories, net | $ | 954.7 | $ | 873.7 |
Page 15 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4.
Long-Term Debt
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Dollars in Millions) | ||||||||
| 0.650% Senior Notes, due 2023 (discharged) | $ | 700.0 | $ | 699.1 | ||||
| 4.250% Senior Notes, due 2024 | 399.3 | 398.9 | ||||||
| 7% Debentures, due 2025 | 124.7 | 124.7 | ||||||
| 3.450% Senior Notes, due 2027 | 298.5 | 298.3 | ||||||
| 3.500% Senior Notes, due 2027 | 491.9 | 491.5 | ||||||
| 2.500% Senior Notes, due 2030 | 471.0 | 470.5 | ||||||
| 2.400% Senior Notes, due 2031 | 889.0 | 888.6 | ||||||
| 6.25% Senior Notes, due 2037 | 228.4 | 228.4 | ||||||
| 4.250% Senior Notes, due 2047 | 590.3 | 590.2 | ||||||
| 3.200% Senior Notes, due 2051 | 850.0 | 849.8 | ||||||
| Total debt | 5,043.1 | 5,040.0 | ||||||
| Less: current maturities | (700.0 | ) | (699.1 | ) | ||||
| Long-term debt | $ | 4,343.1 | $ | 4,340.9 |
On September 29, 2022, the Company satisfied and discharged the 2023 Notes. In connection with the satisfaction and discharge, the Company irrevocably deposited funds with Regions Bank, as trustee under the indenture governing the 2023 Notes, in an amount sufficient to satisfy all remaining principal and interest payments on the 2023 Notes. The Company utilized existing cash resources to fund the satisfaction and discharge. As a result of the satisfaction and discharge of the 2023 Notes, the obligations of the Company under the indenture with respect to the 2023 Notes have been terminated, except those provisions of the indenture that, by their terms, survive the satisfaction and discharge. Because the discharge did not represent a legal defeasance, the 2023 Notes remained on the Company’s consolidated balance sheets at June 30, 2023 and December 31, 2022 and continued to accrete to their par value over the period until maturity. Additionally, the related trust assets were included in Restricted investments (to satisfy discharged debt and related interest) on the Company’s consolidated balance sheets at June 30, 2023 and December 31, 2022. On July 17, 2023, Regions Bank satisfied the remaining principal and interest payments and the 2023 Notes are considered repaid in full.
The Company has a credit agreement with JPMorgan Chase Bank, N.A., as Administrative Agent, Deutsche Bank Securities, Inc., PNC Bank, Truist Bank and Wells Fargo Bank, N.A., as Syndication Agents, and the lenders party thereto (the Credit Agreement), which provides for a $800.0 million five-year senior unsecured revolving facility (the Revolving Facility) with a maturity date of December 21, 2027. Borrowings under the Revolving Facility bear interest, at the Company’s option, at rates based upon the Secured Overnight Financing Rate (SOFR) or a base rate, plus, for each rate, a margin determined in accordance with a ratings-based pricing grid. There were no borrowings outstanding under the Credit Agreement as of June 30, 2023 and December 31, 2022. Any outstanding principal amounts, together with interest accrued thereon, are due in full on that maturity date. Available borrowings under the Revolving Facility are reduced by any outstanding letters of credit issued by the Company under the Revolving Facility. At June 30, 2023 and December 31, 2022, the Company had $2.6 million of outstanding letters of credit issued under the Revolving Facility.
Page 16 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The Credit Agreement requires the Company’s ratio of consolidated net debt-to-consolidated earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), as defined by the Revolving Facility, for the trailing-twelve months (the Ratio) to not exceed 3.50x as of the end of any fiscal quarter, provided that the Company may exclude from the Ratio any debt incurred in connection with certain acquisitions during the quarter or three preceding quarters so long as the Ratio calculated without such exclusion does not exceed 4.00x. Additionally, if no amounts are outstanding under the Revolving Facility or the Company's trade receivable securitization facility (discussed below), consolidated debt, as defined, which includes debt for which the Company is a guarantor (see Note 8), shall be reduced in an amount equal to the lesser of $500.0 million or the sum of the Company’s unrestricted cash and temporary investments, for purposes of the covenant calculation. The Company was in compliance with the Ratio at June 30, 2023.
The Company, through a wholly-owned special-purpose subsidiary, has a $400.0 million trade receivable securitization facility (the Trade Receivable Facility), that matures on September 20, 2023. The Trade Receivable Facility, with Truist Bank, Regions Bank, PNC Bank, N.A., MUFG Bank, Ltd., New York Branch, and certain other lenders that may become a party to the facility from time to time, is backed by eligible trade receivables, as defined. Borrowings are limited to the lesser of the facility limit or the borrowing base, as defined. These receivables are originated by the Company and then sold or contributed to the wholly-owned special-purpose subsidiary. The Company continues to be responsible for the servicing and administration of the receivables purchased by the wholly-owned special-purpose subsidiary. Borrowings under the Trade Receivable Facility bear interest at a rate equal to asset-backed commercial paper costs of conduit lenders plus 0.65% for borrowings funded by conduit lenders and Adjusted Term Secured Overnight Financing Rate (Adjusted Term SOFR), as defined, plus 0.7%, subject to change in the event that this rate no longer reflects the lender’s cost of lending, for borrowings funded by all other lenders. The Trade Receivable Facility contains a cross-default provision to the Company’s other debt agreements. Subject to certain conditions, including lenders providing the requisite commitments, the Trade Receivable Facility may be increased to a borrowing base not to exceed $500.0 million. There were no borrowings outstanding under the Trade Receivable Facility at June 30, 2023 and December 31, 2022.
5.
Financial Instruments
The Company’s financial instruments include temporary cash investments, restricted cash, restricted investments, accounts receivable, note receivable, accounts payable, publicly-registered long-term notes and debentures.
Temporary cash investments are placed primarily in money market funds, money market demand deposit accounts and Eurodollar time deposit accounts with financial institutions. The Company’s cash equivalents have maturities of less than three months. Due to the short maturity of these investments, they are carried on the consolidated balance sheets at cost, which approximates fair value.
Restricted cash is held in a trust account with a third-party intermediary. Due to the short-term nature of this account, the carrying value of restricted cash approximates its fair value.
Restricted investments are held in a fund that invests solely in U.S. Treasury securities. The estimated fair value of the fund is valued at net asset value, which the fund seeks to maintain at one dollar per share. As such, the carrying value of the restricted investments approximates its fair value. The Company is restricted from accessing the investments, which will be used to settle the 2023 Notes and related interest payments. Investment returns on those trust assets are for the account of the Company if there are any remaining after satisfaction of all amounts payable in connection with the 2023 Notes.
Accounts receivable are due from a large number of customers, primarily in the construction industry, and are dispersed across wide geographic and economic regions. No single customer accounted for 10% or more of
Page 17 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
consolidated accounts receivable at June 30, 2023 and December 31, 2022. The carrying values of accounts receivable approximate their fair values.
Note receivable is a promissory note with an unconsolidated affiliate (see Note 8) and is not publicly traded. Management estimates that the carrying value of the note receivable approximates its fair value.
Accounts payable represent amounts owed to suppliers and vendors. The estimated carrying value of accounts payable approximates its fair value due to the short-term nature of the payables.
The carrying value and fair value of the Company’s long-term debt were $5.04 billion and $4.41 billion, respectively, at June 30, 2023 and $5.04 billion and $4.36 billion, respectively, at December 31, 2022. The estimated fair value of the Company’s publicly-registered long-term debt was estimated based on Level 1 of the fair value hierarchy using quoted market prices.
6.
Income Taxes
The effective income tax rate reflects the effect of federal and state income taxes on earnings and the impact of differences in book and tax accounting arising primarily from the permanent tax benefits associated with the statutory depletion deduction for mineral reserves. The effective income tax rates for continuing operations were 20.9% and 22.6% for the six months ended June 30, 2023 and 2022, respectively. The higher 2022 effective income tax rate versus 2023 was driven by the impact of the divestiture of the Colorado and Central Texas ready mixed concrete businesses.
7.
Pension and Postretirement Benefits
The net periodic benefit cost (credit) for pension and postretirement benefits includes the following components:
| Pension | Postretirement Benefits | |||||||||||||||
| Three Months Ended June 30, | ||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Service cost | $ | 9.3 | $ | 14.0 | $ | — | $ | — | ||||||||
| Interest cost | 14.6 | 11.9 | 0.2 | 0.1 | ||||||||||||
| Expected return on assets | (20.3 | ) | (22.5 | ) | — | — | ||||||||||
| Amortization of: | ||||||||||||||||
| Prior service cost (credit) | 1.7 | 1.4 | (0.1 | ) | (0.2 | ) | ||||||||||
| Actuarial loss (gain) | 0.2 | 1.2 | (0.2 | ) | (0.1 | ) | ||||||||||
| Net periodic benefit cost (credit) | $ | 5.5 | $ | 6.0 | $ | (0.1 | ) | $ | (0.2 | ) |
Page 18 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
| Pension | Postretirement Benefits | |||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Service cost | $ | 16.4 | $ | 24.0 | $ | — | $ | — | ||||||||
| Interest cost | 25.7 | 20.6 | 0.2 | 0.2 | ||||||||||||
| Expected return on assets | (35.7 | ) | (38.7 | ) | — | — | ||||||||||
| Amortization of: | ||||||||||||||||
| Prior service cost (credit) | 2.9 | 2.5 | (0.1 | ) | (0.4 | ) | ||||||||||
| Actuarial loss (gain) | 0.3 | 2.0 | (0.3 | ) | (0.1 | ) | ||||||||||
| Net periodic benefit cost (credit) | $ | 9.6 | $ | 10.4 | $ | (0.2 | ) | $ | (0.3 | ) |
The components of net periodic benefit cost (credit), other than service cost, are included in the line item Other nonoperating income, net, in the consolidated statements of earnings and comprehensive earnings. Based on the roles of the employees, service cost is included in the Cost of revenues or Selling, general and administrative expenses line items in the consolidated statements of earnings and comprehensive earnings.
8.
Commitments and Contingencies
Legal and Administrative Proceedings
The Company is engaged in certain legal and administrative proceedings incidental to its normal business activities, including matters relating to environmental protection. The Company considers various factors in assessing the probable outcome of each matter, including but not limited to the nature of existing legal proceedings and claims, the asserted or possible damages, the jurisdiction and venue of the case and whether it is a jury trial, the progress of the case, existing law and precedent, the opinions or views of legal counsel and other advisers, the Company’s experience in similar cases and the experience of other companies, the facts available to the Company at the time of assessment, and how the Company intends to respond to the proceeding or claim. The Company’s assessment of these factors may change over time as proceedings or claims progress. The Company believes the probability is remote that the outcome of any currently pending legal or administrative proceeding will result in a material loss to the Company as a whole, based on currently available facts.
Letters of Credit
In the normal course of business, the Company provides certain third parties with standby letter of credit agreements guaranteeing its payment for certain insurance claims, contract performance and permit requirements. At June 30, 2023, the Company was contingently liable for $26.8 million in letters of credit.
Borrowing Arrangements with Affiliate
The Company is a guarantor with an unconsolidated affiliate for a $15.0 million revolving line of credit agreement with Truist Bank that has a maturity date of March 2024. There were no borrowings outstanding on the line of credit at June 30, 2023. The affiliate has agreed to reimburse and indemnify the Company for any payments and expenses the Company may incur from this agreement. The Company holds a lien on the affiliate’s membership interest in a joint venture as collateral for payment under the revolving line of credit.
In addition, the Company has a $6.0 million interest-only note receivable, due December 31, 2024, outstanding from this unconsolidated affiliate at June 30, 2023 and December 31, 2022.
Page 19 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9.
Segments
The Building Materials business contains two reportable segments: the East Group and the West Group. The Company also has a Magnesia Specialties segment. The Company’s evaluation of performance and allocation of resources are based primarily on earnings from operations. Consolidated earnings from operations include total revenues less cost of revenues; selling, general and administrative expenses; acquisition and integration expenses; other operating income and expenses, net; and exclude interest expense; other nonoperating income and expenses, net; and income tax expense. Corporate loss from operations primarily includes depreciation; expenses for corporate administrative functions; acquisition and integration expenses; and other nonrecurring income and expenses not attributable to operations of the Company's other operating segments. All long-term debt and related interest expense are reported in Corporate.
The following table displays selected financial data for the Company’s reportable segments. Total revenues, as presented on the consolidated statements of earnings and comprehensive earnings, reflect the elimination of intersegment revenues, which represent sales from one segment to another segment. Total revenues and earnings (loss) from operations reflect continuing operations only. In 2022, earnings from operations for the West Group included a nonrecurring gain on divested assets of $151.7 million.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Total revenues: | ||||||||||||||||
| East Group | $ | 735.1 | $ | 674.5 | $ | 1,264.7 | $ | 1,093.3 | ||||||||
| West Group | 1,005.2 | 885.5 | 1,746.3 | 1,620.5 | ||||||||||||
| Total Building Materials business | 1,740.3 | 1,560.0 | 3,011.0 | 2,713.8 | ||||||||||||
| Magnesia Specialties | 80.5 | 81.7 | 163.9 | 158.7 | ||||||||||||
| Total | $ | 1,820.8 | $ | 1,641.7 | $ | 3,174.9 | $ | 2,872.5 | ||||||||
| Earnings (Loss) from operations: | ||||||||||||||||
| East Group | $ | 227.5 | $ | 210.6 | $ | 336.4 | $ | 238.5 | ||||||||
| West Group | 239.6 | 274.5 | 334.3 | 317.6 | ||||||||||||
| Total Building Materials business | 467.1 | 485.1 | 670.7 | 556.1 | ||||||||||||
| Magnesia Specialties | 23.3 | 20.3 | 43.9 | 41.8 | ||||||||||||
| Corporate | (27.1 | ) | (26.8 | ) | (55.3 | ) | (59.5 | ) | ||||||||
| Total | $ | 463.3 | $ | 478.6 | $ | 659.3 | $ | 538.4 |
Page 20 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10.
Revenues and Gross Profit
Performance Obligations. Performance obligations are contractual promises to transfer or provide a distinct good or service for a stated price. The Company’s product sales agreements are single-performance obligations that are satisfied at a point in time. Performance obligations within paving service agreements are satisfied over time, primarily ranging from one day to two years. For product and freight revenues, customer payment terms are generally 30 days from invoice date. Customer payments for the paving operations are based on a contractual billing schedule and are due 30 days from invoice date.
Future revenues from unsatisfied performance obligations at June 30, 2023 and 2022 were $357.8 million and $322.5 million, respectively, where the remaining periods to complete these obligations ranged from one month to 28 months and one month to 23 months, respectively.
Service Revenues. Service revenues, which include paving services located in California and Colorado, were $107.9 million and $95.0 million for the three months ended June 30, 2023 and 2022, respectively, and are reported in the West Group. Service revenues for the six months ended June 30, 2023 and 2022 were $134.3 million and $113.3 million, respectively.
Contract Balances. Costs in excess of billings relate to the conditional right to consideration for completed contractual performance and are contract assets on the consolidated balance sheets. Costs in excess of billings are reclassified to accounts receivable when the right to consideration becomes unconditional. Billings in excess of costs relate to customers invoiced in advance of contractual performance and are contract liabilities on the consolidated balance sheets. The following table presents information about the Company’s contract balances:
| June 30, 2023 | December 31, 2022 | |||||||
| (Dollars in Millions) | ||||||||
| Costs in excess of billings | $ | 22.3 | $ | 5.1 | ||||
| Billings in excess of costs | $ | 6.9 | $ | 10.5 |
Revenues recognized from the beginning balance of contract liabilities for the three months ended June 30, 2023 and 2022 were $4.8 million and $4.5 million, respectively, and for the six months ended June 30, 2023 and 2022 were $8.2 million and $6.6 million, respectively.
Retainage, which primarily relates to the paving services, represents amounts that have been billed to customers but payment withheld until final acceptance of the performance obligation by the customer. Retainage, which is included in Other current assets on the Company’s consolidated balance sheets, was $11.9 million and $13.4 million at June 30, 2023 and December 31, 2022, respectively.
Page 21 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following table, which is reconciled to consolidated amounts, provides total revenues and gross profit (loss) by line of business: Building Materials (further divided by product line) and Magnesia Specialties. Interproduct revenues represent sales from the aggregates product line to the ready mixed concrete and asphalt and paving product lines and sales from the cement product line to the ready mixed concrete product line. Total revenues and gross profit (loss) reflect continuing operations only.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Dollars in Millions) | ||||||||||||||||
| Total revenues: | ||||||||||||||||
| Building Materials business: | ||||||||||||||||
| Aggregates | $ | 1,151.4 | $ | 1,057.6 | $ | 2,063.3 | $ | 1,814.2 | ||||||||
| Cement | 197.7 | 162.5 | 366.2 | 300.8 | ||||||||||||
| Ready mixed concrete | 271.4 | 226.6 | 491.3 | 517.8 | ||||||||||||
| Asphalt and paving services | 240.9 | 215.7 | 298.8 | 272.5 | ||||||||||||
| Less: interproduct revenues | (121.1 | ) | (102.4 | ) | (208.6 | ) | (191.5 | ) | ||||||||
| Total Building Materials business | 1,740.3 | 1,560.0 | 3,011.0 | 2,713.8 | ||||||||||||
| Magnesia Specialties | 80.5 | 81.7 | 163.9 | 158.7 | ||||||||||||
| Total | $ | 1,820.8 | $ | 1,641.7 | $ | 3,174.9 | $ | 2,872.5 | ||||||||
| Gross profit (loss): | ||||||||||||||||
| Building Materials business: | ||||||||||||||||
| Aggregates | $ | 370.9 | $ | 307.3 | $ | 608.9 | $ | 410.0 | ||||||||
| Cement | 93.3 | 50.7 | 140.4 | 77.5 | ||||||||||||
| Ready mixed concrete | 35.4 | 14.6 | 46.6 | 36.6 | ||||||||||||
| Asphalt and paving services | 36.5 | 26.5 | 16.0 | 13.4 | ||||||||||||
| Total Building Materials business | 536.1 | 399.1 | 811.9 | 537.5 | ||||||||||||
| Magnesia Specialties | 27.7 | 24.5 | 52.7 | 50.2 | ||||||||||||
| Corporate | (3.4 | ) | 1.6 | (1.4 | ) | (6.4 | ) | |||||||||
| Total | $ | 560.4 | $ | 425.2 | $ | 863.2 | $ | 581.3 |
Page 22 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
(UNAUDITED) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11.
Supplemental Cash Flow Information
Noncash investing and financing activities are as follows:
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| (Dollars in Millions) | ||||||||
| Accrued liabilities for purchases of property, plant and equipment | $ | 63.1 | $ | 27.3 | ||||
| Remeasurement of operating lease right-of-use assets | $ | 1.4 | $ | (3.5 | ) | |||
| Remeasurement of finance lease right-of-use assets | $ | — | $ | (6.4 | ) | |||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 28.6 | $ | 13.0 | ||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | $ | 16.3 | $ | 7.0 | ||||
| Acquisition of assets through asset exchange | $ | 5.2 | $ | — |
Supplemental disclosures of cash flow information are as follows:
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| (Dollars in Millions) | ||||||||
| Cash paid for interest, net of capitalized amount | $ | 79.6 | $ | 84.3 | ||||
| Cash paid for income taxes, net of refunds | $ | 83.0 | $ | 42.9 |
Page 23 of 42
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.